EXCERPTS:
"My take is summed up the by the quotations marks I’ve put around “measuring.” Blinder and Zandi don’t really measure the impact of government intervention. They measure what the model says is the impact. The model is based on past relationships that were unable to predict where we are now. This quote from the CBO explaining why their estimates of the impact of the stimulus on employment did not actually look at the actual data of the economy after the stimulus passed sums it up best for me:
"CBO has also examined incoming data on output and employment during the period since ARRA’s enactment. However, those data are not as helpful in determining ARRA’s economic effects as might be supposed, because isolating the effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, the new data add only limited information about ARRA’s impact.
In other words–we don’t have a reliable model of the economy in its current state. The CBO concludes that we should instead look at previously estimated relationships in the economy (holding everything else constant) and that’s the best we can do. I conclude we’re incapable of holding everything else constant and therefore the CBO’s results are fake science.
Saturday, July 31, 2010
Evicting Bianca Jagger - WSJ.com
EXCERPTS:
"Jetsetter and social activist Bianca Jagger has lost her legal bid to keep her knock-down-price rental at 530 Park Avenue.
A New York state judge last week ordered Mick's ex to pay $708,600 in back rent and other fines to her landlords. Ms. Jagger spent nearly 20 years in the two bedroom apartment—rent-stabilized at $4,600 a month. But then she complained about poor upkeep. The landlords in turn noted that Ms. Jagger, in the U.S. on a tourist visa, shouldn't pay the lower rent since New York isn't her "primary residence," one of the criteria under rent control laws.
A state appeals court sided with them in 2008 and last week another court upheld the decision and said she could be evicted. As part of the fine, the judge ruled that Ms. Jagger owes $246,468 for the "fair market use and occupancy" over the years she was in dispute with the landlords. They said the apartment would have gone on the open market for $8,800 a month.
The case sums up the insanity of regulating prices in one of the world's most competitive and dynamic real estate markets. Rent control, a "temporary" World War II-era measure that survives into this century, creates housing shortages, drives up prices for non-rent control real estate and contributes to middle class flight. As Ms. Jagger perhaps found out with her moldy apartment, artificially keeping down rents gives landlords the rational financial incentive to skimp on upkeep.
Worse than that, rent control disproportionately subsidizes the affluent. A Harvard University study in the late 1980s found that rent-controlled apartments were in some of the cities best neighborhoods, that 94% of its tenants were white and roughly three-quarters were families without children....
"Jetsetter and social activist Bianca Jagger has lost her legal bid to keep her knock-down-price rental at 530 Park Avenue.
A New York state judge last week ordered Mick's ex to pay $708,600 in back rent and other fines to her landlords. Ms. Jagger spent nearly 20 years in the two bedroom apartment—rent-stabilized at $4,600 a month. But then she complained about poor upkeep. The landlords in turn noted that Ms. Jagger, in the U.S. on a tourist visa, shouldn't pay the lower rent since New York isn't her "primary residence," one of the criteria under rent control laws.
A state appeals court sided with them in 2008 and last week another court upheld the decision and said she could be evicted. As part of the fine, the judge ruled that Ms. Jagger owes $246,468 for the "fair market use and occupancy" over the years she was in dispute with the landlords. They said the apartment would have gone on the open market for $8,800 a month.
The case sums up the insanity of regulating prices in one of the world's most competitive and dynamic real estate markets. Rent control, a "temporary" World War II-era measure that survives into this century, creates housing shortages, drives up prices for non-rent control real estate and contributes to middle class flight. As Ms. Jagger perhaps found out with her moldy apartment, artificially keeping down rents gives landlords the rational financial incentive to skimp on upkeep.
Worse than that, rent control disproportionately subsidizes the affluent. A Harvard University study in the late 1980s found that rent-controlled apartments were in some of the cities best neighborhoods, that 94% of its tenants were white and roughly three-quarters were families without children....
Who Decides on Health Care Value? - WSJ.com
EXCERPTS:
"What would you think if bureaucrats confiscated your iPhone because they decided it didn't provide enough value? State regulators may help the federal government do just that to the health-care benefits of millions of Americans.
The most important element in implementing ObamaCare will be the requirement for health insurers to meet what is called a medical loss ratio. This requires health-insurance plans to split the dollars they receive from insurance premiums into two buckets.
Depending on the type of insurance coverage, 80% to 85% of premiums must be spent on either medical services or "activities that improve health care quality." This bucket includes everything from doctor visits, hospital stays and surgery to prescription drugs and medical equipment. It also includes programs to help patients cope with chronic diseases and reminders to take prescribed medications. The remaining 15% to 20% of premiums falls into a smaller bucket of "administrative" expenses like overhead, marketing, profits, compensation and agent commissions.
Regulators will soon decide which specific activities fall into which bucket. Forcing a wide range of services and benefits into the smaller administrative bucket puts them in direct competition with other critical aspects of a health insurer's business, as health plans will be compelled to cut back on those activities labeled "administrative" to meet new federal requirements. Plans will be forced to choose between priorities that benefit patients—such as preventing health-care fraud and reducing unnecessary services—and other priorities like creating new technological innovations or upgrading equipment....
"What would you think if bureaucrats confiscated your iPhone because they decided it didn't provide enough value? State regulators may help the federal government do just that to the health-care benefits of millions of Americans.
The most important element in implementing ObamaCare will be the requirement for health insurers to meet what is called a medical loss ratio. This requires health-insurance plans to split the dollars they receive from insurance premiums into two buckets.
Depending on the type of insurance coverage, 80% to 85% of premiums must be spent on either medical services or "activities that improve health care quality." This bucket includes everything from doctor visits, hospital stays and surgery to prescription drugs and medical equipment. It also includes programs to help patients cope with chronic diseases and reminders to take prescribed medications. The remaining 15% to 20% of premiums falls into a smaller bucket of "administrative" expenses like overhead, marketing, profits, compensation and agent commissions.
Regulators will soon decide which specific activities fall into which bucket. Forcing a wide range of services and benefits into the smaller administrative bucket puts them in direct competition with other critical aspects of a health insurer's business, as health plans will be compelled to cut back on those activities labeled "administrative" to meet new federal requirements. Plans will be forced to choose between priorities that benefit patients—such as preventing health-care fraud and reducing unnecessary services—and other priorities like creating new technological innovations or upgrading equipment....
Tuesday, July 27, 2010
How Smart Are We? - Thomas Sowell
EXCERPTS:
"Elites may have more brilliance, but those who make decisions for society as a whole cannot possibly have as much experience as the millions of people whose decisions they pre-empt. The education and intellects of the elites may lead them to have more sweeping presumptions, but that just makes them more dangerous to the freedom, as well as the well-being, of the people as a whole....
"Elites may have more brilliance, but those who make decisions for society as a whole cannot possibly have as much experience as the millions of people whose decisions they pre-empt. The education and intellects of the elites may lead them to have more sweeping presumptions, but that just makes them more dangerous to the freedom, as well as the well-being, of the people as a whole....
Thursday, July 22, 2010
Wednesday, July 21, 2010
Monday, July 19, 2010
Obama on incentives, relief, and unemployment
EXCERPTS:
"Over the past few weeks, a majority of senators have tried -– not once, not twice, but three times –- to extend emergency relief [to unemployed workers] on a temporary basis. Each time, a partisan minority in the Senate has used parliamentary maneuvers to block a vote, denying millions of people who are out of work much-needed relief. These leaders in the Senate who are advancing a misguided notion that emergency relief somehow discourages people from looking for a job should talk to these folks.
That attitude I think reflects a lack of faith in the American people, because the Americans I hear from in letters and meet in town hall meetings –- Americans like Leslie and Jim and Denise -- they’re not looking for a handout. They desperately want to work. Just right now they can’t find a job. These are honest, decent, hardworking folks who’ve fallen on hard times through no fault of their own, and who have nowhere else to turn except unemployment benefits and who need emergency relief to help them weather this economic storm.
Now, tomorrow we will have another chance to offer them that relief, to do right by not just Jim and Leslie and Denise, but all the Americans who need a helping hand right now -- and I hope we seize it. It’s time to stop holding workers laid off in this recession hostage to Washington politics. It’s time to do what’s right -- not for the next election but for the middle class. We’ve got to stop blocking emergency relief for Americans who are out of work. We’ve got to extend unemployment insurance. We need to pass those tax cuts for small businesses and the lending for small businesses.
Times are hard right now. We are moving in the right direction. I know it’s getting close to an election, but there are times where you put elections aside. This is one of those times. And that’s what I hope members of Congress on both sides of the aisle will do tomorrow.
"Over the past few weeks, a majority of senators have tried -– not once, not twice, but three times –- to extend emergency relief [to unemployed workers] on a temporary basis. Each time, a partisan minority in the Senate has used parliamentary maneuvers to block a vote, denying millions of people who are out of work much-needed relief. These leaders in the Senate who are advancing a misguided notion that emergency relief somehow discourages people from looking for a job should talk to these folks.
That attitude I think reflects a lack of faith in the American people, because the Americans I hear from in letters and meet in town hall meetings –- Americans like Leslie and Jim and Denise -- they’re not looking for a handout. They desperately want to work. Just right now they can’t find a job. These are honest, decent, hardworking folks who’ve fallen on hard times through no fault of their own, and who have nowhere else to turn except unemployment benefits and who need emergency relief to help them weather this economic storm.
Now, tomorrow we will have another chance to offer them that relief, to do right by not just Jim and Leslie and Denise, but all the Americans who need a helping hand right now -- and I hope we seize it. It’s time to stop holding workers laid off in this recession hostage to Washington politics. It’s time to do what’s right -- not for the next election but for the middle class. We’ve got to stop blocking emergency relief for Americans who are out of work. We’ve got to extend unemployment insurance. We need to pass those tax cuts for small businesses and the lending for small businesses.
Times are hard right now. We are moving in the right direction. I know it’s getting close to an election, but there are times where you put elections aside. This is one of those times. And that’s what I hope members of Congress on both sides of the aisle will do tomorrow.
Thursday, July 15, 2010
Signs of the Times
EXCERPTS:
"The current issue of Bloomberg Businessweek has a feature article about businesses that are just holding on to huge sums of money. They say, for example, that the pharmaceutical company Pfizer is holding on to $26 billion. If so, there should not be any great mystery as to why they don't invest it.
With the Obama administration being on an anti-business kick, boasting of putting their foot on some business' neck, and the president talking about putting his foot on another part of the anatomy, with Congress coming up with more and more red tape, more mandates and more heavy-handed interventions in businesses, would you risk $26 billion that you might not even be able to get back, much less make any money on the deal?
Pfizer is not unique. Banks have cut back on lending, despite all the billions of dollars that were dumped into them in the name of "stimulus." Consumers have also cut back on spending.
For the first time, more gold is being bought as an investment to be held as a hedge against a currently non-existent inflation than is being bought by the makers of jewelry. There may not be any inflation now, but eventually that money is going to start moving, and so will the price level.
Despite a big decline in the amount of gold used to make jewelry, the demand for gold as an investment has risen so steeply as to more than make up for the reduced demand for gold jewelry, and has in fact pushed the price of gold to record high levels.
What does all this say? That people don't know what to expect next from this administration, which seldom lets a month go by without some new anti-business laws, policies or rhetoric.
When you hire somebody in this environment, you know what you have agreed to pay them and what additional costs there may be for their health insurance or other benefits. But you have no way of knowing what additional costs the politicians in Washington are going to impose, when they are constantly coming up with new bright ideas for imposing more mandates on business.
"The current issue of Bloomberg Businessweek has a feature article about businesses that are just holding on to huge sums of money. They say, for example, that the pharmaceutical company Pfizer is holding on to $26 billion. If so, there should not be any great mystery as to why they don't invest it.
With the Obama administration being on an anti-business kick, boasting of putting their foot on some business' neck, and the president talking about putting his foot on another part of the anatomy, with Congress coming up with more and more red tape, more mandates and more heavy-handed interventions in businesses, would you risk $26 billion that you might not even be able to get back, much less make any money on the deal?
Pfizer is not unique. Banks have cut back on lending, despite all the billions of dollars that were dumped into them in the name of "stimulus." Consumers have also cut back on spending.
For the first time, more gold is being bought as an investment to be held as a hedge against a currently non-existent inflation than is being bought by the makers of jewelry. There may not be any inflation now, but eventually that money is going to start moving, and so will the price level.
Despite a big decline in the amount of gold used to make jewelry, the demand for gold as an investment has risen so steeply as to more than make up for the reduced demand for gold jewelry, and has in fact pushed the price of gold to record high levels.
What does all this say? That people don't know what to expect next from this administration, which seldom lets a month go by without some new anti-business laws, policies or rhetoric.
When you hire somebody in this environment, you know what you have agreed to pay them and what additional costs there may be for their health insurance or other benefits. But you have no way of knowing what additional costs the politicians in Washington are going to impose, when they are constantly coming up with new bright ideas for imposing more mandates on business.
Tuesday, July 13, 2010
Amity Shlaes: FDR, Obama and 'Confidence' - WSJ.com
EXCERPTS:
"Over the summer of 1933, FDR found himself relying increasingly on someone he was sure would say "yes"—Morgenthau, his timid old Dutchess County neighbor who held a post at the Farm Credit Administration. With the aid of his "yes" man, Roosevelt launched a novel gold purchase program. The plan was to drive up the general price level by buying gold. Each morning, FDR set the gold price target, personally. This in turn was supposed to help farmers, who would get higher prices for commodities.
Theoretically, Roosevelt's idea of reflating can be defended. More money might mean more growth.
But the exposure to investors that Morgenthau was getting through the gold purchase project of 1933 was already teaching him something. Investors didn't like the arbitrariness. It took away their confidence. One day Morgenthau asked FDR why the president had chosen to drive up the price of gold by 21 cents. The president cavalierly said he'd done that because 21 was seven times three, and three was a lucky number. "If anyone ever knew how we really set the gold price through a combination of lucky numbers etc., I think they would be frightened," Morgenthau wrote in his diary. And they were: In the second half of 1933 a powerful stock rally flattened.
***
Morgenthau remained torn between loyalty to FDR and loyalty to office. But from then on, he expressed his disgust for arbitrary intervention. Referring to an agriculture department program that killed swine in order to reduce supply and drive up prices, Morgenthau once commented, "I think from the day we started killing pigs there has been a curse on this administration."
"Over the summer of 1933, FDR found himself relying increasingly on someone he was sure would say "yes"—Morgenthau, his timid old Dutchess County neighbor who held a post at the Farm Credit Administration. With the aid of his "yes" man, Roosevelt launched a novel gold purchase program. The plan was to drive up the general price level by buying gold. Each morning, FDR set the gold price target, personally. This in turn was supposed to help farmers, who would get higher prices for commodities.
Theoretically, Roosevelt's idea of reflating can be defended. More money might mean more growth.
But the exposure to investors that Morgenthau was getting through the gold purchase project of 1933 was already teaching him something. Investors didn't like the arbitrariness. It took away their confidence. One day Morgenthau asked FDR why the president had chosen to drive up the price of gold by 21 cents. The president cavalierly said he'd done that because 21 was seven times three, and three was a lucky number. "If anyone ever knew how we really set the gold price through a combination of lucky numbers etc., I think they would be frightened," Morgenthau wrote in his diary. And they were: In the second half of 1933 a powerful stock rally flattened.
***
Morgenthau remained torn between loyalty to FDR and loyalty to office. But from then on, he expressed his disgust for arbitrary intervention. Referring to an agriculture department program that killed swine in order to reduce supply and drive up prices, Morgenthau once commented, "I think from the day we started killing pigs there has been a curse on this administration."
Dad Tosses Tot Into Traffic: Cops | NBC Bay Area
"Dad Throws Toddler Into Traffic: Cops
By JESSICA GREENE
Updated 12:53 PM PDT, Mon, Jul 12, 2010
A 21-year-old Oakland man is in police custody after he threw his baby daughter into the path of a moving car, according to cops.
Police say an off-duty officer saw the man, later identified as John Taylor, shake the 18-month girl and throw her into oncoming traffic on Fifth Avenue near East 15th Street around 5:39 p.m. Saturday. A Volkswagen Jetta almost hit the toddler, police say, and the car's undercarriage burned and scraped the girl.
The girl, Jayla, lives with her mother and had been visiting with her father that day. After Taylor allegedly threw his baby daughter into the lane of traffic, he took off running, pounding on and kicking cars along the way, police said.
While a neighbor pulled the baby girl out from underneath the Jetta, police chased Taylor down.
The girl's mother, Alena Bartholemew, doesn't believe the story. She says Taylor was under attack and did what he could to protect their baby.
"I'm hurting now because I know my baby's father is in jail facing charges and I don't feel that it is reasonable," Bartholemew told NBC Bay Area. "Anybody who feels that they think that John had thrown the baby out, please get that out your mind -- there is no reason to believe that. He is a great father to her."
Drivers in the neighborhood tried to stop Taylor as he ran from cops. When officers caught up with him, they found him in a violent scuffle with those motorists. Police hit Taylor with a Taser and arrested him.
Taylor was arrested on suspicion of of willful cruelty to a child, vandalism, resisting arrest and battery on a police officer.
First Published: Jul 12, 2010 6:50 AM PDT
By JESSICA GREENE
Updated 12:53 PM PDT, Mon, Jul 12, 2010
A 21-year-old Oakland man is in police custody after he threw his baby daughter into the path of a moving car, according to cops.
Police say an off-duty officer saw the man, later identified as John Taylor, shake the 18-month girl and throw her into oncoming traffic on Fifth Avenue near East 15th Street around 5:39 p.m. Saturday. A Volkswagen Jetta almost hit the toddler, police say, and the car's undercarriage burned and scraped the girl.
The girl, Jayla, lives with her mother and had been visiting with her father that day. After Taylor allegedly threw his baby daughter into the lane of traffic, he took off running, pounding on and kicking cars along the way, police said.
While a neighbor pulled the baby girl out from underneath the Jetta, police chased Taylor down.
The girl's mother, Alena Bartholemew, doesn't believe the story. She says Taylor was under attack and did what he could to protect their baby.
"I'm hurting now because I know my baby's father is in jail facing charges and I don't feel that it is reasonable," Bartholemew told NBC Bay Area. "Anybody who feels that they think that John had thrown the baby out, please get that out your mind -- there is no reason to believe that. He is a great father to her."
Drivers in the neighborhood tried to stop Taylor as he ran from cops. When officers caught up with him, they found him in a violent scuffle with those motorists. Police hit Taylor with a Taser and arrested him.
Taylor was arrested on suspicion of of willful cruelty to a child, vandalism, resisting arrest and battery on a police officer.
First Published: Jul 12, 2010 6:50 AM PDT
Tuesday, July 6, 2010
Obama Focuses on Economic Growth - WSJ.com
EXCERPTS:
"The great economic debate emerging in Washington—simple and a bit simplistic—goes like this: Should the U.S. government be spending more money to stimulate the sagging economy, or should it be saving money because of the giant budget deficit?
That's an important question, to be sure, but something has gone missing in the argument: What about economic growth, which could help stimulate the economy and fight the deficit at the same time?
This week, the Obama administration is trying to shift the discussion back to economic growth.
***
That's where Mr. Obama is trying to take the discussion this week, administration aides say. The push started Saturday, when he devoted his weekly radio address to talking about $2 billion in Energy Department grants going to two solar-energy companies: a solar-power plant in Arizona and a Colorado plant making solar panels.
Spending money on the solar plants puts the president on the wrong side of the deficit-cutting impulse, but it also allowed him to talk about creating more than 5,000 jobs, at a time when overall job-creation numbers are frail. In the same vein, Mr. Obama this week will visit a Kansas City facility that makes electric delivery vehicles, with help from a $32 million grant from stimulus-bill funds.
Next, the White House will try to move on to expanding American exports, a theme that was big in Mr. Obama's State of the Union address this year but which has gotten lost in the shuffle in recent months. Mr. Obama will meet this week with a recently created "export council" of business leaders who are supposed to help find ways to expand American exports.
QUESTION:
In these examples of the administration's plans for encouraging economic growth, what is directing how resources will be used? The information contained in market prices about the goods and services that consumers value, and the response of profit-seeking businesses as they try to provide those consumer-desired goods and services? Or, government decisions about what goods and services should be produced, and then government actions to motivate businesses to produce those government-desired goods and services?
"The great economic debate emerging in Washington—simple and a bit simplistic—goes like this: Should the U.S. government be spending more money to stimulate the sagging economy, or should it be saving money because of the giant budget deficit?
That's an important question, to be sure, but something has gone missing in the argument: What about economic growth, which could help stimulate the economy and fight the deficit at the same time?
This week, the Obama administration is trying to shift the discussion back to economic growth.
***
That's where Mr. Obama is trying to take the discussion this week, administration aides say. The push started Saturday, when he devoted his weekly radio address to talking about $2 billion in Energy Department grants going to two solar-energy companies: a solar-power plant in Arizona and a Colorado plant making solar panels.
Spending money on the solar plants puts the president on the wrong side of the deficit-cutting impulse, but it also allowed him to talk about creating more than 5,000 jobs, at a time when overall job-creation numbers are frail. In the same vein, Mr. Obama this week will visit a Kansas City facility that makes electric delivery vehicles, with help from a $32 million grant from stimulus-bill funds.
Next, the White House will try to move on to expanding American exports, a theme that was big in Mr. Obama's State of the Union address this year but which has gotten lost in the shuffle in recent months. Mr. Obama will meet this week with a recently created "export council" of business leaders who are supposed to help find ways to expand American exports.
QUESTION:
In these examples of the administration's plans for encouraging economic growth, what is directing how resources will be used? The information contained in market prices about the goods and services that consumers value, and the response of profit-seeking businesses as they try to provide those consumer-desired goods and services? Or, government decisions about what goods and services should be produced, and then government actions to motivate businesses to produce those government-desired goods and services?
Saturday, July 3, 2010
Regime Uncertainty and Economic Crisis - HUMAN EVENTS
EXCERPT:
"Unfortunately it is now more important to producers to predict what the federal government is going to do than to innovate in the production of goods that consumers will desire. Market economies are extremely resilient and magnificently efficient in producing goods and services for the masses and making the best use of resources. However, markets require that all participants be certain of the rules of the game and that property rights be protected. The actions of the federal government over the past few years have created a situation where regime uncertainty threatens the well-being of all but the politically connected.
"Unfortunately it is now more important to producers to predict what the federal government is going to do than to innovate in the production of goods that consumers will desire. Market economies are extremely resilient and magnificently efficient in producing goods and services for the masses and making the best use of resources. However, markets require that all participants be certain of the rules of the game and that property rights be protected. The actions of the federal government over the past few years have created a situation where regime uncertainty threatens the well-being of all but the politically connected.
The Rational Optimist, by Matt Ridley: A book excerpt - Your Olive Branch News
The Rational Optimist, by Matt Ridley: A book excerpt - Your Olive Branch News
Comment:
Given the economic problems that the country faces at the moment, it's easy to lose perspective on where we stand today relative to the past. If reading the news gets you down and you could use some encouragement, you really should read this entire excerpt from The Rational Optimist. It demonstrates that we really do have a tremendous number of things for which to be thankful. It also shows that we should think long and hard about how our economic system works, and about the ways in which it has enriched our lives, before we make major changes which may lead to consequences very different from what were intended.
Comment:
Given the economic problems that the country faces at the moment, it's easy to lose perspective on where we stand today relative to the past. If reading the news gets you down and you could use some encouragement, you really should read this entire excerpt from The Rational Optimist. It demonstrates that we really do have a tremendous number of things for which to be thankful. It also shows that we should think long and hard about how our economic system works, and about the ways in which it has enriched our lives, before we make major changes which may lead to consequences very different from what were intended.
Friday, July 2, 2010
Six Months to Go Until
The Largest Tax Hikes in History
EXCERPTS:
"In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:
First Wave: Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:
Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:
- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%
Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.
The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.
Second Wave: Obamacare
There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:
The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:
The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”
Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.
Read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171##ixzz0sXQBdtlX
"In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:
First Wave: Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:
Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:
- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%
Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.
The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.
Second Wave: Obamacare
There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:
The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:
The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”
Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.
Read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171##ixzz0sXQBdtlX
Walmart CEO Pay: More in an Hour Than Workers Get All Year?
EXCERPTS:
"ABC News
Walmart CEO Pay: More in an Hour Than Workers Get All Year?
Walmart Executive-Worker Pay Gap Stirkes Chord in Chicago and Beyond
By ALICE GOMSTYN
ABC NEWS Business Unit
July 2, 2010 —
By Ed Smith's math, the CEO of Walmart earns more in an hour than his employees will earn in a year.
Smith, an alderman in Chicago, presented posters at a city council meeting showing that Walmart CEO Michael Duke's $35 million salary, when converted to an hourly wage, worked out to $16,826.92. By comparison, at a Walmart store planned for the Windy City's Pullman neighborhood, new employees to be paid $8.75 an hour would gross $13,650 a year.
Smith's numbers could be a bit off. Equilar, an executive compensation research firm, calculates that Duke earned just south of $20 million in 2009 and $28 million in 2008, not counting millions of dollars in potential performance awards. But the alderman argued that there's still a "sad" contrast between Duke's compensation and the wages of his employees.
"How can you go to bed at night and sleep knowing you make this kind of money and the people working for you can hardly buy a package of beans and rice?" he asked in an interview with ABCNews.com.
Walmart, meanwhile, said that its wages across the country are competitive in local markets and that on average, hourly employee pay -- which includes more experienced workers but not managers -- ranges from $10 to more than $12.
The retail giant made no apologies for Duke's salary.
"I don't think Mike Duke needs, as the CEO of a Fortune 1 company, needs me to defend his compensation package," said Walmart director of community affairs Steven Restivo, referring to Walmart's status as the largest company on the planet.
The debate over Walmart wages has been a thorny local issue in Chicago, where city aldermen on Wednesday reluctantly approved plans for a new Walmart store. It also speaks to continued concerns nationwide over the pay gap between top executives and their rank-and-file employees.
A study last fall by the Institute for Policy Studies, a liberal Washington D.C. research group, found that CEOs in the country's S&P 500 companies make, on average, 319 times more than the average American worker.
IPS associate fellow Sam Pizzigati said that in the 1970s, that ratio was 30 to 1.
"We've seen, over the past three decades, a tenfold-plus increase in the gap between top executives and average American workers," Pizzigati said. "That Chicago alderman is putting his finger on a very real problem in American economic life."
Why the Pay Gap Has Grown
Pizzigati said the reasons for the yawning gap are two-fold. Declining top-bracket tax rates over the last half-century, he said, took away a strong disincentive for company boards to keep a lid on CEO pay.
The top marginal tax rate, he said, dropped from 91 percent in the 1960s to 28 percent in 1980s. It stands at 35 percent today.
"If you look at historical record, executive pay really started exploding in early 1980s," he said. "That's when the top rate started precipitously falling."
On the worker side, Pizzigati said, wages have been hurt by the declining power of U.S. organized labor. When it represented more than one-third of the American workforce, unions could influence wages -- and force them higher -- throughout the labor market. With just seven percent of Americans represented by unions today, Pizzigati said, that's no longer the case.
Paul Hodgson, a senior research associate at the executive compensation watchdog group The Corporate Library, attributed the gap to another factor: the use of stock awards in CEO pay. Notwithstanding the recent financial crisis, stocks have seen tremendous gains since the 1980s and that, he said, has been reflected in CEO compensation.
As a result, he said, "CEO pay has been growing exponentially while everyone else's wages have been growing arithmetically."
Companies that shell out blockbuster salaries and benefits maintain that high compensation is necessary to attract the best talent to top positions.
In Chicago, in recent years the compensation issue has centered largely on so-called big box stores like Walmart. In 2006, the city's mayor vetoed a resolution by the city council in 2006 to raise minimum hourly pay by giant retailers in the city to $10 plus $3 worth of benefits.
Chicago Labor Leaders Wanted Higher Pay at Walmart
This week's approval of the new Walmart store came despite demands by labor organizers that Walmart, a non-union company, should pay at least $11 an hour to new employees. Walmart countered that the $8.75 it plans to pay -- which is 50 cents above Chicago's minimum wage -- is more than the starting hourly wages of unionized grocery store workers in the area.
An organizer for Local 881 United Food and Commercial Workers declined to comment on wages for union members, citing ongoing contract negotiations, but said that, overall, members receive better health insurance and retirement benefits than Walmart employees. (In its defense, Walmart said its health insurance plans offer "a wide range of options" and trumpeted its 401k and profit sharing plans.)
Smith said he ultimately decided to join his fellow aldermen in unanimously voting to allow the Pullman store because of the jobs the store is expected to create and its addition to the city's tax base.
He, too, would have liked to see the retailer pay at least $11 an hour to new employees, but added that he's glad Walmart's $8.75 starting pay is above minimum wage.
"As Kenny Rogers says, 'You gotta know when to hold them and know when to fold 'em,'" Smith said. "So that's what we did."
Copyright © 2010 ABC News Internet Ventures
"ABC News
Walmart CEO Pay: More in an Hour Than Workers Get All Year?
Walmart Executive-Worker Pay Gap Stirkes Chord in Chicago and Beyond
By ALICE GOMSTYN
ABC NEWS Business Unit
July 2, 2010 —
By Ed Smith's math, the CEO of Walmart earns more in an hour than his employees will earn in a year.
Smith, an alderman in Chicago, presented posters at a city council meeting showing that Walmart CEO Michael Duke's $35 million salary, when converted to an hourly wage, worked out to $16,826.92. By comparison, at a Walmart store planned for the Windy City's Pullman neighborhood, new employees to be paid $8.75 an hour would gross $13,650 a year.
Smith's numbers could be a bit off. Equilar, an executive compensation research firm, calculates that Duke earned just south of $20 million in 2009 and $28 million in 2008, not counting millions of dollars in potential performance awards. But the alderman argued that there's still a "sad" contrast between Duke's compensation and the wages of his employees.
"How can you go to bed at night and sleep knowing you make this kind of money and the people working for you can hardly buy a package of beans and rice?" he asked in an interview with ABCNews.com.
Walmart, meanwhile, said that its wages across the country are competitive in local markets and that on average, hourly employee pay -- which includes more experienced workers but not managers -- ranges from $10 to more than $12.
The retail giant made no apologies for Duke's salary.
"I don't think Mike Duke needs, as the CEO of a Fortune 1 company, needs me to defend his compensation package," said Walmart director of community affairs Steven Restivo, referring to Walmart's status as the largest company on the planet.
The debate over Walmart wages has been a thorny local issue in Chicago, where city aldermen on Wednesday reluctantly approved plans for a new Walmart store. It also speaks to continued concerns nationwide over the pay gap between top executives and their rank-and-file employees.
A study last fall by the Institute for Policy Studies, a liberal Washington D.C. research group, found that CEOs in the country's S&P 500 companies make, on average, 319 times more than the average American worker.
IPS associate fellow Sam Pizzigati said that in the 1970s, that ratio was 30 to 1.
"We've seen, over the past three decades, a tenfold-plus increase in the gap between top executives and average American workers," Pizzigati said. "That Chicago alderman is putting his finger on a very real problem in American economic life."
Why the Pay Gap Has Grown
Pizzigati said the reasons for the yawning gap are two-fold. Declining top-bracket tax rates over the last half-century, he said, took away a strong disincentive for company boards to keep a lid on CEO pay.
The top marginal tax rate, he said, dropped from 91 percent in the 1960s to 28 percent in 1980s. It stands at 35 percent today.
"If you look at historical record, executive pay really started exploding in early 1980s," he said. "That's when the top rate started precipitously falling."
On the worker side, Pizzigati said, wages have been hurt by the declining power of U.S. organized labor. When it represented more than one-third of the American workforce, unions could influence wages -- and force them higher -- throughout the labor market. With just seven percent of Americans represented by unions today, Pizzigati said, that's no longer the case.
Paul Hodgson, a senior research associate at the executive compensation watchdog group The Corporate Library, attributed the gap to another factor: the use of stock awards in CEO pay. Notwithstanding the recent financial crisis, stocks have seen tremendous gains since the 1980s and that, he said, has been reflected in CEO compensation.
As a result, he said, "CEO pay has been growing exponentially while everyone else's wages have been growing arithmetically."
Companies that shell out blockbuster salaries and benefits maintain that high compensation is necessary to attract the best talent to top positions.
In Chicago, in recent years the compensation issue has centered largely on so-called big box stores like Walmart. In 2006, the city's mayor vetoed a resolution by the city council in 2006 to raise minimum hourly pay by giant retailers in the city to $10 plus $3 worth of benefits.
Chicago Labor Leaders Wanted Higher Pay at Walmart
This week's approval of the new Walmart store came despite demands by labor organizers that Walmart, a non-union company, should pay at least $11 an hour to new employees. Walmart countered that the $8.75 it plans to pay -- which is 50 cents above Chicago's minimum wage -- is more than the starting hourly wages of unionized grocery store workers in the area.
An organizer for Local 881 United Food and Commercial Workers declined to comment on wages for union members, citing ongoing contract negotiations, but said that, overall, members receive better health insurance and retirement benefits than Walmart employees. (In its defense, Walmart said its health insurance plans offer "a wide range of options" and trumpeted its 401k and profit sharing plans.)
Smith said he ultimately decided to join his fellow aldermen in unanimously voting to allow the Pullman store because of the jobs the store is expected to create and its addition to the city's tax base.
He, too, would have liked to see the retailer pay at least $11 an hour to new employees, but added that he's glad Walmart's $8.75 starting pay is above minimum wage.
"As Kenny Rogers says, 'You gotta know when to hold them and know when to fold 'em,'" Smith said. "So that's what we did."
Copyright © 2010 ABC News Internet Ventures
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